UK cake maker Finsbury Food Group has said the past six months have been extremely challenging for the company.

The group achieved sales of £27.7m (US$50.1m), of which £22.9m came from its Cardiff-based Memory Lane Cakes trading subsidiary. Memory Lane saw sales for the six months to 31 December 2003 increase by 24% on the previous year and the highest Christmas sales level in its history, with year-on-year sales of Christmas product lines doubling.

However, Finsbury said Memory Lane has relied on the seasonal recruitment of labour to enable it to complete its Christmas production programme and in 2003 there was an extreme local shortage of suitable labour, which led to significant manufacturing inefficiencies in the months running up to Christmas.

"In addition, raw material cost pressures persisted longer than had been expected and these factors were principally responsible for a post-tax loss of £0.2m in the first half-year," the company said.

"The group is addressing these issues; firstly, by implementing a programme of capital expenditure in Cardiff, which will reduce the labour requirement for a number of processes and secondly, by strengthening the key planning and supply chain functions," it added.

The company said trading of Nicholas & Harris Ltd, its speciality bread making operating subsidiary, is in line with expectations.

In September 2003 Finsbury secured a contract for exclusive use of the Nestlé confectionery brands in the UK ambient cake market. The contract began on 1 January 2004 and distribution is through both the multiple retailers and food service channels. The company said the rollout of products is going well and there are now twelve products in the range.